Payment Systems Infrastructure Boosts Financial Inclusion in China
A recent report by the World Bank highlights the significant progress made by China in establishing a comprehensive and robust national payment system infrastructure. This development has contributed to the expansion and diversification of physical access points, including commercial bank branches, sub-branches, agents, and new-type rural financial service provider branches.
Expansion of Physical Access Points
According to the report, the People’s Bank of China has encouraged and facilitated the establishment of one of the widest point-of-sale (POS) systems in the country. This initiative has enabled millions of Chinese adults to access formal financial services, bringing them into the financial mainstream.
Regulatory Framework
The report notes that policymakers in China have moved from a “wait and see” approach to establishing a more comprehensive regulatory framework for new providers and products. This ensures the long-term integrity and stability of the financial system and adequate protections for consumers.
Indicators of Financial Inclusion
As a result, indicators such as:
- The number of adults with accounts in financial institutions
- Formal savings
- Formal borrowing
have seen significant improvements.
China’s Experience: A Regulatory Approach that Promotes Innovation while Monitoring Risks
China’s experience demonstrates the importance of establishing a regulatory approach that promotes innovation while actively monitoring and addressing risks. This allows for sustainable growth and stability in the financial system, promoting financial inclusion.
Financial Inclusion Challenges Remain in Egypt
In contrast, Egypt faces significant challenges in achieving financial inclusion. The Central Bank of Egypt (CBE) is leading the country’s financial inclusion policy process, but FI performance in Egypt lags behind global averages.
Limited Access to Banking Services
The report highlights several salient features of financial inclusion in Egypt, including:
- Limited access to banking services, particularly for small depositors and borrowers
- High minimum required deposit amounts, hindering the poor from participating in the banking system
- A limited role for the financial sector in financing new investments
- Preferential treatment by banks towards large corporate clients and connected individuals
Improvement in Indicators of Financial Inclusion
The report notes that indicators of financial inclusion have shown improvement over time, with a significant increase in:
- ATMs
- Commercial bank branches per 100,000 adults
However, availability remains the most important dimension for explaining financial inclusion in Egypt.
Conclusion
China’s experience demonstrates the importance of establishing a comprehensive and robust national payment system infrastructure to promote financial inclusion. In contrast, Egypt faces significant challenges in achieving financial inclusion, including limited access to banking services, high minimum required deposit amounts, and preferential treatment by banks towards large corporate clients.
To overcome these challenges, continuous efforts are vital to keep pace with financial deepening and innovation. Policymakers must actively monitor and address risks while promoting a regulatory approach that supports financial inclusion.